Electricity rate hikes and a resumption of nuclear power plant operations are needed to keep Tokyo Electric Power Co. afloat, according to a government panel appraising the management and financial condition of the utility.
Electricity rate hikes and a resumption of nuclear power plant operations are needed to keep Tokyo Electric Power Co. afloat, according to a government panel appraising the management and financial condition of the utility.
The panel presented its report to Prime Minister Yoshihiko Noda on Oct. 3 in which it predicted TEPCO would accumulate excess liabilities of 1.985 trillion yen ($ 25.8 billion) if electricity rates were left unchanged and nuclear plants remained offline.
Bankruptcy of TEPCO would mean there would be no entity to pay compensation for damages arising from the accident at its Fukushima No. 1 nuclear power plant and no stable supply of electricity in eastern Japan.
But the report also said TEPCO's estimate of 1.185 trillion yen saved through cost-cutting measures was inadequate.
Instead, the panel estimated that TEPCO would be able to come up with 3.253 trillion yen for compensation purposes, including 2.546 trillion yen over the next decade by cutting personnel expenses and pension benefits and selling off 707.4 billion yen in assets over a three-year period.
The report will provide the basis for a special business plan to be compiled in October by TEPCO and the government agency established to provide assistance for compensation payments.
The report forecasts a total of 4.540 trillion yen in compensation payments over a two-year period.
The expected recurring damage was estimated at 1.025 trillion yen for the first year and 897.2 billion yen annually thereafter.
Temporary damage, such as lost revenue from negative publicity surrounding the nuclear accident, was estimated at 2.618 trillion yen. The cost for decommissioning the four reactors at the Fukushima plant was estimated at 1.151 trillion yen.
In calculating how TEPCO would come up with future operating funds, the panel mixed a number of alternatives, including a resumption of operations at the Kashiwazaki-Kariwa nuclear power plant, and three scenarios for raising electricity rates--no increase, 5 percent and 10 percent.
If no nuclear plant operations are resumed and electricity rates remain unchanged, TEPCO would face a shortfall of 8.6 trillion yen, according to the panel. Even with a 10-percent increase in rates, TEPCO would run a deficit of 4.2 trillion yen, the panel said.